Posted 07/29/2015

Home loan calculator

If you are going to be purchasing a home and have less than 20% to put down, you will be required to pay private mortgage insurance (PMI). These insurance fees will vary depending the size of the down payment and credit score.

PMI protects lenders in the event the borrower cannot pay back the loan. Even with a Federal Housing Authority (FHA) loan, borrowers without a 20% down payment are required to pay insurance each month. With a FHA loan, the insurance requirement doesn’t go away once there is 20% equity in the home.

The PMI payment is usually paid monthly as part of the overall mortgage payment to the lender. Once your loan balance reaches 80% of the homes current value, you can contact your lender and ask that the PMI payment be removed. Many borrowers forget to cancel the insurance and continue to pay. Your lender will automatically remove the insurance when the loan-to-value (LTV) ratio drops to 78% of the original value.

If you feel your home has increased in value, you can get an appraisal performed. You will want to contact your lender to find out the proper way to go about this. Keep in mind most lenders will require you to pay PMI for two years regardless of if your home has increased in value and reached 80% LTV. So you may want to hold off on having an appraisal done too soon and save yourself $400.00.

If you have any questions regarding PMI, please contact one of our Mortgage Professionals @ 763-416-2600 or visit us online at www.muihomeloans.com.

Posted 07/20/2015

splitting house

Refinancing your home is typically a choice you make to reduce your monthly payment by taking advantage of a lower rate from what you currently have. There is a time when refinancing isn’t a choice but a necessity.

If you’re going through a divorce and both names are on the mortgage, refinancing is your only option to get a spouse’s name off of the mortgage.

There are several things to consider when going through this trying time.

Determine who is going to stay in the house.

Every situation is different. Some will feel it’s best to sell the property, split the profit and move forward. If you have children, the spouse with primary custody may choose to live in the house and keep the kid’s life as normal as possible. This can work, but you’ll have to refinance the mortgage loan since this is the only way to remove a co-borrower’s name from the loan.

Can you afford your home?

Lenders will look at your income to determine if you can afford the new mortgage on your own. The mortgage payment cannot be more than 28 percent to 30 percent of your gross income, and your total monthly debt payments cannot exceed 43 percent of your gross income. Your child support and alimony will be factored in as well.

Is your credit strong enough?

You will need to meet the lenders credit score requirements. You need to have a credit score of at least 620 to qualify but that score is on the low end and you will likely be at a higher interest rate with a higher payment than if you had a higher credit score. With a good credit score, over 700, you will be looking at a significantly lower monthly payment.

If your credit score is poor and you aren’t yet able to refinance, you can work out a deal with your ex to allow you to keep making the payments until your credit is repaired. This could take anywhere from six months to a year depending on what is on your credit report. You can then re-apply for to refinance.

There are many credit repair companies out there. Be sure to do your due diligence when seeking a credit repair company. The average price for this type of service is around $600.

Lastly, the quit claim deed.

If you’re able to refinance and remove your spouse’s name from the mortgage loan, he or she also needs to sign a quit claim deed, which transfers ownership of the property to you. Refinancing takes a name off the mortgage loan, but not the title.

If you have any questions regarding your home when getting a divorce, please give one of our Mortgage Professionals a call at 763-416-2600.

Posted 06/26/2015

The pros and cons to putting more than 20% down on your new home. 

Home loan calculator

One of the most common questions home buyers will ask their Mortgage Consultant relates to how much money they need to put down on a home. There are mortgage requirements in place that establish minimum down payment requirements, and some home buyers will barely have enough to pay the minimum down payment as well as closing costs. However, if you have access to more money, you may be wondering if you should make a larger down payment. But is this a good idea? Let’s take a closer look.

Having Liquid Assets Available After Closing
It is important to consider how much available cash you will have access to after closing if you do make a larger down payment. There are many costs associated with home ownership to think about, such as unexpected repair costs, paying a homeowners’ insurance deductible if a mishap occurs and even furnishing your new home. Once your funds are invested in your home, you will only be able to tap into those funds by refinancing. You may consider placing extra cash into a more liquid asset if you do not have a lot of extra cash available to you.

Qualifying for a Lower Interest Rate
Depending on your loan program, you may be able to qualify for a lower interest rate if you place more money down with your new mortgage. This is not always the case, so you will want to review this option with your Mortgage Consultant. Keep in mind that interest will impact your mortgage payment as well as the amount of your mortgage interest tax deduction at the end of the year.

Having a Lower Mortgage Payment
When you obtain a lower loan amount with your mortgage, your mortgage payment will be lower. This can make your budget more affordable going forward. Because a mortgage payment is generally one of the higher expenses in a budget, the importance of this cannot be understated.

Using Funds for Other Purposes
You should also consider other ways that you could use your additional funds. For example, you may have high interest rates debts that you could pay off, or you may be able to invest the additional funds in the stock market. For some, tying funds up in a home is practical, but it is not always the best option available.

Each situation is unique, and you should speak with a Mortgage Consultant at Mortgages Unlimited to discuss the pros and cons of a larger down payment with your specific loan application. 763-416-2600.

Posted 03/17/2015

Pre-Approval vs. Pre-Qualification

Is there a difference between a pre-approval and a pre-qualification. YES! The two are entirely separate things!

Most of the frustration in buying a home can be traced to the confusion between these two terms.

Here’s what these terms really mean:

A pre-qualification means that someone answers questions about their debts, income, and other relevant information. They might even bring in a pay stub to “prove” their income. But nothing is officially checked or documented.

A pre-qualification is going on the “honor system.” And based on the information given to them by the client, the loan officer will tell them if they would qualify for a home…..in theory. 

This does NOT mean you are guaranteed to qualify. 

Almost anybody can be pre-qualified, but an actual pre-approval requires more due diligence.

A common scenario is buyers going out to look at homes with a Realtor because they are pre-qualified…but not pre-approved. They think they are officially qualified to buy a home.

Maybe their debt to income ratio is higher than they stated because they forgot to mention a $500 car payment or a $700/month child support commitment. Maybe they’ve only been at their job for a month, so there isn’t enough official income history. Unfortunately, there are many variables that people just don’t think of. This includes tax liens, a bankruptcy, child-support obligations, student loans, etc.

BEFORE YOU START HOUSE HUNTING, get a full pre-approval. This alone will prevent nine out of ten potential problems that come up during the financing process.

So What Exactly Is A Pre‑Approval?

For a pre‑approval, you will fill out an official application.

(Sometimes with pre-qualifications, you might fill out an application as well….it’s just not binding or official)

This application will include your W2 forms for two years, your pay stubs, your tax returns for two years, and your entire credit report.  The applicant will also need to provide employment history. A credit report is also pulled.

Your type of income is very important:

If you’re on commission income, and have only been on commission for let’s say, six months, you cannot use that commission income. A two‑year history of full time commission income is usually required.

Rather than avoiding the due diligence process, it’s better to find out RIGHT AWAY if you’ll qualify for your mortgage. If not, you’ll be extremely disappointed that you didn’t actually qualify for the home you wanted to buy. Your Realtor will be upset, and the seller will be upset that you wasted their time!

Happy-Face

The pre-approval process can seem intimidating and very formal, but it’s really not too complicated. The bank just wants to make sure that they’re making a good decision loaning you money! Especially after the last housing boom and bust, banks are extra careful to make sure they’re making loans to creditworthy borrowers.

It might feel like they’re trying to make you not qualify. And there’s probably some truth to that. After all, you aren’t borrowing $20,000 when you buy a house….usually you’re borrowing ten times that amount—or more! So it makes sense that the bank would do some research to manage its risk.

If you pass the gauntlet, you’re in.

The loan officer’s job is to be the intermediary between the bank and the client. The loan officer WANTS YOU TO QUALIFY.

Once you’re approved, you’re ready to go. Onward to the home search!

Be armed with the goods before you go out house hunting. With a pre-approval, you will show you are a serious buyer and when the right home presents itself, you will be ready to take action. Having a pre-approval for a home loan should be the first step you take when preparing to purchase a home. 

 

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